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Gerpisa colloquium, Berlin (2010)

Abstract:

Since the late 1970s, the companies of Brazil’s automotive sector have undergone a process of vertical disintegration, which has led to an increasing demand for quality products and services automakers receive from their suppliers. On the other hand, this disintegration has led to an increase in the number of suppliers, thus augmenting the complexity of the management of relationships with suppliers and the companies’ supply-related activities.

Brazil’s automotive industry has been experiencing the challenges of competition on a global scale and has undergone major transformations since the early 1990s, particularly after the implementation of the Real Plan and the adoption of a regulatory norm called the “New Automotive Regime”. Multinational automakers already operating in the country focused their investments to establish new plants and update existing ones, modernizing products and manufacturing processes, implementing new forms of management and production and work organization, and establishing new standards of relationships with their suppliers.

Today, practically all the world’s major automakers have manufacturing units in Brazil. The automotive sector in Brazil comprises companies such as General Motors, Volkswagen, Ford and Fiat, which have been established in the country for several decades. The introduction of a new automotive regime in 1995 gave rise to heavy investments by multinationals such as Hyundai, Mitsubishi, Nissan, Renault, PSA Peugeot Citroën, Toyota, Honda, Mercedes-Benz, Ford, GM, and VW/Audi. This process included an active participation of the State, both through regulatory and macroeconomic policies, which resulted in alterations of the export tariffs and of the tax on industrial goods.

Up until the 1990s, the Brazilian auto parts industry presented a structure segmented into two major groups: (1) the first composed of large national and multinational companies that supplied products of greater technological density directly to the automakers, and (2) the second group comprising a large number of small and medium-sized auto parts manufacturers, mostly with national capital, which produced items of less technological complexity primarily for the aftermarket, supplying on a lower scale to automakers located in the country.

Associated with this new wave of investments, new companies in the auto parts sector installed new plants to meet the demand for the production of new vehicle models, as well as through associations with or acquisitions of companies of domestic capital. Thus, the sector became internationalized and integrated to the productive chain on a global scale. Along this process, a new division was established in the work of designing and producing parts and vehicles, bringing about a strong hierarchization of the productive chain. The new investments transformed the country into a stage for innovative experiences in the implementation of new approaches such as the industrial condominium and the modular consortium.

These strategies usually imply the delegation of responsibilities to suppliers, who assume design and manufacturing functions, which in turn increases their power within the supply chain. The literature points to a shift from the traditional competitive and short-term client-supplier relationship to strategic partnerships of long-term collaboration. In other words, companies are encouraged to abandon the traditional buyer-seller relationship in favor of a more stable and collaborative relationship with their suppliers. This work aims to study the client-supplier relationships in Brazil’s automotive industry, attempting to outline a relational typology based on case studies carried out at fourteen auto parts suppliers.

Visits were made to 14 first tier suppliers of automakers installed in Brazil, in order to garner information about some structural characteristics and about the relationships of these suppliers with their automaker clients. This can therefore be considered a multi-case study which sought to investigate contemporary phenomena within their context in real life, especially when the limits between them are not well defined. The techniques used here to obtain information were the collection of data at the companies and interviews, using a questionnaire with closed questions and a semi-structured script with open-ended questions, to allow the interviewer the freedom to develop each situation in the most suitable direction. The interviews were conducted with middle or top management professionals in the areas of manufacturing, logistics and supply, product and process development, purchasing and human resources. Each interview was accompanied by a technical visit. This stage was carried out in 2007.

In synthesis, it is an essentially qualitative research, with a relatively complex strategy for obtaining information, based on the analysis of secondary data, in loco analysis, and interviews with professionals of these companies. The companies analyzed here are first tier suppliers of automakers operating in Brazil. They have different sizes, employing from 50 to 11,500 people.

Generalizations cannot be made, but the findings of these case studies on client-supplier relationships in Brazil’s automotive industry demonstrate that the companies under study have changed the way they relate, distancing themselves from the traditional model (market, buy and sell relationships) and moving toward a model of a more collaborative and long-term nature.

It can be inferred that the relations at the companies surveyed are closer to the characteristics of the associative model, with long-term relationships and greater mutual dependence, but that cost is still used as the principal criterion when it comes time to select a supplier.
The relationships studied here cannot be qualified as strictly those of “partners” or “adversaries” due to the fact that not all relationships will be of partners and neither will they all maintain an atmosphere of confrontation. One should therefore consider the existence of intermediary positions between these two extremes. This relationship will depend on the volume, the strategic importance of the supplied component, the technological capacity, and the design competence of the supplier, etc.

These empirical findings follow along the same lines as those found in studies in other countries, where contracts extend at least throughout the life time of a model, there is a reduction in the number of suppliers per component, and competency is based essentially on cost reduction, quality and the assurance of delivery times.